The bonds are expected to be sold through competitive bid on June 28,
2016.

In addition, Fitch has affirmed the state's 'AA+' Issuer Default Rating
(IDR) and the 'AA+' rating on the state's approximately $19 billion in
outstanding GO bonds.

The Rating Outlook is Stable.

SECURITY

The bonds are GOs of the state to which its full faith, credit, and
taxing power are pledged. Motor vehicle fuel tax GO bonds are first
payable from state excise taxes on motor vehicle and special fuels.

KEY RATING DRIVERS

Washington's 'AA+' rating reflects the state's solid economy with strong
growth prospects, a demonstrated commitment to fiscal balance, and
combined long-term liabilities that place a low burden on resources
despite an above-average debt load. Fitch believes that strong budget
control will allow the state to continue to address challenges,
including K-12 education funding demands pursuant to a court decision,
while maintaining fundamental financial flexibility even at times of
economic and revenue decline.

Economic Resource Base

Washington's economy is characterized by generally sound performance and
increased employment diversification. The state economy is growing at a
faster rate than the U.S., and the state is well positioned for
above-average results going forward. The economy is still heavily
influenced by Boeing and Microsoft, while Amazon and other technology
companies continue to expand. The workforce is highly educated, income
levels are comparatively high, and the state poverty rate is below the
national average.

Revenue Framework: 'aaa' factor assessment

Washington relies on broad consumption-based revenues, with no income
tax. This revenue mix means that consumer spending and construction
trends are quickly reflected in revenue results. Revenue performance
over time has tracked economic performance, and Fitch expects this to
continue to support solid growth prospects. The state has complete
independent control over taxation, with an essentially unlimited legal
ability to raise operating revenues as needed.

Expenditure Framework: 'aa' factor assessment

Washington benefits from solid expenditure flexibility with a low burden
of carrying costs for debt service and retiree benefits and the broad
expense-cutting authority common to most U.S. states. Education is a key
cost driver, as is Medicaid, but Fitch expects these costs to remain
manageable.

Long-Term Liability Burden: 'aaa' factor assessment

The combined burden of debt plus pensions is low as a percentage of
personal income, although solidly above the median for U.S. states.
Elevated debt ratios incorporate the funding of substantial capital
needs, particularly for transportation but are offset by a moderate
unfunded pension liability.

Operating Performance: 'aa' factor assessment

Washington has responsive financial management and very strong
gap-closing capacity. In a moderate economic downturn, Fitch expects the
state would act in line with historical practice, drawing down reserves
and managing revenues and spending to maintain balance and overall
financial flexibility. As conditions improve, the state replenishes its
cushion against future underperformance. The initiative and referendum
environment creates some uncertainty, but this is limited by the
legislature's authority to amend or repeal any law approved by voters in
this manner.

RATING SENSITIVITIES

SOLID FINANCIAL & LIABILITY MANAGEMENT: The rating is sensitive to
shifts in Washington's fundamental credit characteristics, including a
low liability burden supported by an increased focus on debt
affordability. The rating assumes that the state will address near-term
budgetary challenges, primarily related to K-12 education funding
requirements, in a sustainable manner.

CREDIT PROFILE

Washington State's economy, historically reliant on manufacturing
supplemented by regional and international trade and tourism, has
broadened. Areas of concentration, including Boeing and Microsoft, offer
relatively high-wage employment, and the population is well educated. In
addition, population growth has far exceeded that of the U.S. as a
whole, a trend that seems likely to continue.

Washington entered the last recession later than the U.S. overall
following a period when it performed much more strongly than the nation.
Peak-to-trough, the state's recessionary decline in non-farm employment
matched that of the nation. The recovery has been significantly more
robust, and amongst the strongest of the states. The state's
unemployment rate exceeds that of the U.S., incorporating labor force
growth that is well ahead of the national pace.

Revenue Framework

Washington's revenue structure is based on a retail sales tax (about 50%
of state general fund revenues) and, to a much lesser extent, a business
and occupation gross receipts tax (20%) and state property tax (10-15%).
The importance of the real estate excise tax (a projected 4% of revenues
in fiscal 2016) varies considerably depending on the point in the
economic cycle. The state does not have an income tax.

This revenue structure makes the state budget sensitive to trends in
consumer spending. In addition, construction (labor and materials) is
subject to the broad sales tax and significant to revenue performance.
Fitch expects revenues to continue to reflect cyclical trends and the
state's ongoing population growth.

Like most states, Washington has complete independent legal ability to
control taxes, a significant credit strength. A 2013 state supreme court
decision found a prior 2/3 legislative vote requirement for tax
increases to be unconstitutional, making it easier to raise revenues. A
November 2015 initiative that attempted to re-establish the restriction
by other means also was found to be unconstitutional.

Expenditure Framework

As in most states, education and health and human services are
Washington's largest operating expenses. Education is the larger line
item, with state funding for local school districts and the public
university and college system accounting for about 57% of state general
fund expenditures. Human services programs represent another 33%.
Initiative 601 (approved by voters in 1993) limits expenditure growth
based on average growth in personal income over the prior 10 years; any
excess revenue is deposited in the budget stabilization account.

Washington's spending growth, absent policy actions, will likely be in
line with to marginally above revenue growth, requiring regular budget
management to ensure ongoing balance. The ongoing fiscal challenge of
Medicaid is common to all U.S. states. The state is facing a more acute
and near-term challenge related to K-12 education funding, although this
emerges from a court decision rather than the natural trajectory of
growth.

The McCleary state supreme court decision of 2012 found Washington's
education funding inadequate.

The state has made progress towards addressing the court's demands with
increased K-12 spending in the current and prior biennial budgets;
however, in August 2015, the court determined the state had still not
addressed several important aspects of the McCleary decision and issued
an order instituting a daily fine until the legislature adopts a
complete plan. The state has estimated that meeting the remaining
McCleary decision obligations could require as much as $3.5 billion per
biennium above currently budgeted K-12 spending levels.

Fitch sees this as mainly a policy rather than credit issue for the
state; the fines ($100,000 a day into an account segregated for K-12
spending) are insignificant compared to the size of the state's budget
and the accumulated funds support education spending. Nevertheless, it
does place some limit on the state's still solid expenditure cutting
flexibility. K-12 education will continue to require significant focus
and may limit spending in other areas, absent revenue-raising increases.

Long-Term Liability Burden

On a combined basis, Washington's burden of net tax-supported debt and
adjusted unfunded pension obligations, at 8.5%, is above the 5.8% median
for U.S. states (per Fitch's 2015 state pension update), reflecting a
debt burden that is more than twice the U.S. state median. The pension
burden is below average and the state has successfully implemented
pension reforms. The combined liabilities place a low burden on the
state's resource base, and Fitch expects this to remain so even given
the state's large capital projects.

Washington's debt alone equals about 65% of total long-term liabilities.
Debt is primarily GO. Capital needs are substantial, particularly for
transportation. The state has repeatedly demonstrated its ability and
willingness to raise revenues in support of transportation capital
investment, most recently through a gas tax increase in the 2015
session. Tolling is also part of the funding solution.

Positively, the state has increased its focus on debt affordability in
recent years. In November 2012, voters approved a constitutional
amendment that tightened the constitutional debt limit, which limits
annual debt service as a percent of revenues.

The state administers 13 defined benefit retirement plans, three of
which have hybrid defined benefit/defined contribution options. The
closed public employees and teachers plans (PERS1 and TRS1), which have
been closed since 1977, account for the bulk of the unfunded liability.
The state has effectively made changes to manage pension costs; a
supreme court in 2014 upheld pension reforms that had been subject to
longstanding legal challenge. The state has deferred payments to the
closed pension systems in times of economic strain.

Other post-employment benefits (OPEB) are limited and funded on a
pay-as-you-go basis.

Contingent liabilities include a school district credit enhancement
program that provides a GO guarantee to $9.9 billion in school district
debt. The enhancement has never been called upon.

Operating Performance

Frequent reviews of economic and financial forecasts allow the state to
respond effectively to changing conditions. As the economy and revenues
repeatedly and significantly underperformed estimates in the last
recession, the state demonstrated its willingness and ability to take
actions in response. The state implemented a combination of ongoing and
one-time actions, and fully depleted accumulated reserves. Fitch expects
the state to similarly make use of its very strong gap-closing capacity
during future cyclical downturns. The governor can enact
across-the-board cuts to eliminate a projected deficit.

Budgeting has remained challenging and sometimes contentious even in the
current recovery, including due to the McLeary-related K-12 demands and
a new statutory mandate that the budget show projected balance over a
four-year period rather than just the current biennium. However, the
state has taken advantage of this time of growth to rebuild financial
flexibility.

As the economy and revenues have recovered solidly, Washington has
replenished reserves and strengthened reserve funding mechanisms. The
state ended the fiscal 2013-2015 biennium on June 30, 2015 with reserves
of $1.5 billion (including the general fund ending balance and the
budget stabilization account), equal to 9% of tax revenues and 5.6% of
total general fund and related fund spending (including federal funds).
The enacted budget for the current 2015-2017 biennium projected a net
decline in total reserves by the end of fiscal 2017 to a still sizable
$1.2 billion.

The state has solid funding provisions for its budget stabilization
account (BSA). The constitutional account was approved by voters in
2007. The BSA receives 1% of revenues off the top every year, capped at
10% of annual general revenues. In 2011, voters approved another
constitutional amendment that requires any extraordinary growth in state
revenue (defined as growth in general state revenues that exceed by
one-third the average biennial growth of the prior five biennia) be
transferred to the BSA on top of the 1%. This measure also serves to
limit revenue volatility.

Washington's initiative and referendum environment creates a level of
operating and financial uncertainty. However, it is significant that any
law approved by voters in this manner can be amended or repealed by the
legislature by a two-thirds vote in the first two years after approval
and by a simple majority thereafter. The legislature repeatedly has
shown the ability and willingness to suspend initiatives. The state
constitution may not be amended by initiative or referendum.

Current Developments

Quarterly forecast revisions since budget enactment have increased
general fund-state revenue estimates for the current biennium to $37.4
billion. The most recent revision added $294 million to the estimate on
June 15th, reflecting stronger-than-expected revenue collections.
Revenues in the current biennium are now expected to grow at the fastest
pace since fiscal 2005-2007.

Expenditure projections also have increased since budget enactment. A
2016 supplemental budget added spending, including an appropriation from
the BSA for wildfire-related costs of $190 million that were well above
the historical averages on which the budget was based.

The net effect of these changes is a projected ending reserve and
balance for the biennium that is increased from budget enactment to $1.5
billion.

In addition to the sources of information identified in Fitch's
applicable criteria specified below, this action was informed by
information from Lumesis and InvestorTools.

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